Why Contract and Temporary Employment May Become the New Normal

Welcome to the 1099 Economy: From Amazon to Uber, many companies are benefitting from hiring contract and temporary employees.

By Freddie Rohner, iHire

When a recession hits, companies are forced to tighten their belts and aggressively cut operating costs whenever and wherever possible. A common tactic to reduce payroll expenses is to hire contractors or temporary personnel rather than full-time employees. This strategy has been used for years – it worked following the 1990–1991 recession, the 2001 recession, and, most recently, the Great Recession (2007–2009). There’s something a little different about the use of contract and contingent workers nowadays, though: it doesn’t seem to be going away as the economy regains its strength.

To be fair, this movement really started in the early 2000s. Immediately following the 2001 recession, and with tech startups rising and falling at a rapid pace, the so-called “gig economy” began picking up steam. It hit a plateau soon after the economy recovered but never returned to 1990s levels. Since the Great Recession ended halfway through 2009, the number of temporary workers climbed more than 50% (the biggest jump since the government began tracking this segment of the labor force in 1990). Furthermore, since 2004, there has been an 18% increase in individual proprietorships, partnerships, or corporations with zero employees (AKA contractors) while payroll employment only grew by 3.5%.

It’s easy to see a trend developing and completely understandable from an employer’s point of view. Temporary and contingent workers enable companies to create a more elastic, “on-demand” labor force. It’s kind of like the Netflix of staffing strategies. The arrangement can potentially benefit both parties – businesses are able to engage highly skilled professionals at a lower rate than if they were permanent employees and contingent workers enjoy far more freedom, earning lucrative pay without being tied down long term. There are certain hazards involved, of course – companies can be fined for abusing the system by misclassifying employees as contractors and they risk losing temporary workers who have found permanent employment elsewhere (which could cause trouble if it happens in the middle of a project) – but most businesses are happy to embrace a hiring approach that allows them to get the most out of their employees without having to take on additional liabilities such as retirement benefits or health insurance.

The shift toward a contingent workforce has been made possible by changes in technology and culture. Enabling professionals to work from home and operate as if they were in the office has made telecommuting a far more realistic solution for many companies. Technical improvements have also allowed employers to accelerate the hiring process, making finding and onboarding temporary or contingent workers easier and less cost prohibitive.

Another key driver has been the influx of millennial workers. Much has been written about this generation’s approach toward professional life (which we won’t rehash here), but their attitude toward employment is important to understand. Many would gladly accept lower pay and/or short-term engagements in exchange for the ability to telecommute, the liberty to accept side projects, and the freedom to take extended time off. This is causing a ripple effect as more companies try to attract young and dynamic workers.

One final aspect to examine is the fact that, in certain high-demand fields, talent is so scarce (and wages so inflated) that some companies have turned to contingent workers as the only way to make payroll costs more palatable. Many would undoubtedly prefer to hire full-time employees but have simply been priced out of the market (and the professionals in these fields are happy to take advantage of the situation and accept short-term gigs knowing full well that another opportunity will present itself).

So what does this mean for the average job seeker? It signifies a fundamental shift in the employment landscape that workers of all ages should take into consideration as they plan their next career moves. In previous decades, a professional history dotted with temporary stints or contract positions might set off alarm bells for HR reps and hiring managers. That is no longer the case.

Workers can, and should, be more open to accepting offers on a contract or contingent basis. There are certain fields where this arrangement is quickly becoming the norm. Hospitals have combatted a shortage of qualified doctors and nurses by engaging staffing agencies. School districts employ long-term substitutes rather than take on the benefit costs tied to hiring new teachers. Tech companies enlist engineers on a per-project basis, getting the talent they need to meet specific goals. “On-demand” employment is here to stay, so instead of railing against the change, embrace it. Never stop looking for your next great opportunity and find a way to use this trend toward contingent work to your advantage.